Toyota Settles With U.S. for $1.2 Billion Over Recalls, Feds Will Audit Company for Three Years

UPDATE, 10/6/2017: A federal judge has agreed to drop criminal charges against Toyota as the company met obligations under the settlement’s three-year supervised probation term, which ended in August, according to Reuters.

Toyota will pay $1.2 billion to avoid criminal wire fraud charges and has admitted to misleading consumers and federal agencies over its unintended acceleration recalls that affected more than 10 million cars worldwide.

According to court documents and statements filed today by the U.S. Attorney’s office in Manhattan, the settlement, which ends a four-year investigation into the company’s 2009–2012 recalls with floor mat entrapment and sticky pedals, is the largest penalty ever filed against an automaker. Toyota has until next Tuesday to make the payment in full to the U.S. government and essentially starts a three-year probation that will let federal agencies, including the FBI, scrutinize every safety decision they deem fit to probe.

The Department of Justice, citing several damning emails and documents circulated internally, said the company limited the initial 2009 recall to eight vehicles despite knowing that additional cars were affected and that it instructed its pedal supplier “orally” to make redesigned pedal parts “without a paper trail” in order to “hide the problem from NHTSA and the public.” Toyota had first discovered the pedal issue in Europe a year earlier and began investigating the stuck pedals in the U.S. months before it originally stated it had discovered them. In many cases, internal documents detailing the pedal and floor mat problems were either ignored by senior management or withheld from the NHTSA. One Toyota employee, after leaving a presentation to the NHTSA in January 2010, reportedly said “Idiots! Someone will go to jail if lies are repeatedly told. I can’t support this.”

No criminal charges have been filed against any Toyota employees. In the settlement, Toyota must pay for an on-site independent auditor that reports to the U.S. Attorney’s office to monitor the company’s safety-related activities for the next three years. Employees will also have a whistleblower hotline to report any problems. The U.S. will drop the criminal charge only if Toyota passes the audit with flying colors.

“We have made fundamental changes across our global operations to become a more responsive company—listening better to our customers’ needs and proactively taking action to serve them,” Christopher Reynolds, Toyota’s chief legal officer, said in a statement.

While the National Highway Traffic Safety Administration ruled out electronic interference with the company’s throttle sensors, Toyota had to replace throttle pedals that were becoming partially stuck due to a defective part inside the pedal assembly. As part of the recalls, Toyota also reshaped pedals that were becoming lodged into floor mats and made adjustments to floor mat tie-downs. By December 2012—after being fined a total of $66.2 million by the NHTSA for delaying the recalls—Toyota paid a $1.1-billion settlement to cover the economic losses of its owners during the recall and to install brake-override systems that would automatically shut off the throttle with the brake pedal depressed. Toyota is still embroiled in civil cases for wrongful death and other allegations related to the recalls. According to the NHTSA, 89 people may have died due to unintended acceleration in Toyota models.

“Companies that make inherently dangerous products must be maximally transparent, not two-faced,” Preet Bharara, the Manhattan U.S. Attorney, said in a statement. “That is why we have undertaken this landmark enforcement action. And the entire auto industry should take notice.”